Commit to the reserve fund.

Okay, I gotta admit this was good for a chuckle:

The UGA athletic board met, and approved the spending of $12 million to renovate baseball’s Foley Field. When the news was tweeted out by this reporter, a member of the football team, cornerback Sheldon Dawson, immediately responded.

“And we can’t get no indoor (practice facility),” he wrote, the disgust hard to miss.

Now, I agree with Seth that there’s a certain amount of symbolism attached to the IPF.  It’s not my highest financial priority, although I understand the arguments of those who disagree about that.  And I also acknowledge that we’re in an era and a region where universities are routinely expected to do with less and less public funding of their needs.  (Private funding is the new black for SEC athletic facilities.)  So I get that prudence and caution with athletic department funds aren’t dirty words.

However, methinks they doth protest a wee bit too much.

The subject of the Georgia athletics department’s massive reserve fund came up about midway through the meeting. An accountant with Ernst and Young had just presented his annual audit of the athletic association, reporting that as the new fiscal year began Georgia had $67.1 million in that reserve fund.

Yes, $67.1 million. Seemingly a lot of money to throw around, and build four-and-a-half indoor practice facilities.

But it’s not that simple.

Board member Bill Archer, a retired executive with Georgia Power, spoke up. Yes, that’s a lot of money, but UGA has almost twice that in debt, Archer pointed out.

“We got that money there. But we got a lot of that money there because we took out bonds to get it,” Archer said.

Across the table another board member, Bob Bishop, chimed in with agreement.

“That’s what I like to call unallocated funds,” Bishop said.

Is there another athletic department in the country that’s more defensive about how it handles its money making than Georgia’s?  I’m hard-pressed to think of one.  And here’s what’s particularly noteworthy here – this is coming from a program that is routinely in the top three or four nationally in terms of athletic department profitability, but ranks nowhere near as high in overall revenues.  It’s not hard to do the math to figure out how that’s possible.

As far as the bonds argument goes, I think any average Joe or Jane who’s ever borrowed money to buy a house will tell you that assuming you’ve made a sound investment, cash flow is a lot more relevant than whether you’ve got enough money in the bank to pay the mortgage off tomorrow.  Georgia is doing swimmingly there, and stands to do even better once the new TV moneys start rolling in.

So you’ll have to pardon me if I take McGarity’s hand wringing about revenues…

“You see that big reserve there, but our margin’s right now are not very strong, because of our revenue. Think about it, we haven’t raised ticket prices since ’08. … The only way we can really generate more revenue is to raise ticket prices. We don’t want to do that.”

… with a rather sizeable grain of salt.

How much has the SEC’s wealth grown? Just four years ago, the SEC distributed $132.5 million ($11 million per school), meaning the conference’s payout has increased by 118 percent since its current ESPN and CBS deals began in 2009-10.  [Emphasis added.]

As far as using the reserve fund to pay down the outstanding debt, that’s something you do if it’s your best financial option.  It’s not something you do emotionally, simply because you feel better with less debt on the books.  And when I say “best financial option”, that doesn’t just mean what kind of rate you can get investing your savings (although that’s certainly a valid goal).  It also means taking steps to strengthen the programs that generate the cash flow that grows the reserve fund.

As the article indicates, this isn’t all about McGarity.  But there is a unity of purpose at work there.  Let’s just say B-M is lucky to have somebody like Mark Richt at the helm of the football program.  In a number of ways, Richt helps make knee-jerk frugality pay off.

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30 Comments

Filed under Georgia Football, It's Just Bidness

30 responses to “Commit to the reserve fund.

  1. MurphDawg

    It’s true they haven’t raised ticket prices since ’08 but a quick look at the minimum contribution to the Hartman fund required to be offered new season tickets underscores why they haven’t done so. If I am not mistaken, in ’08 the number of priority points required to become a new season ticket holder was 10,000. Last year that number was 500. Using that drop off as a basis, it sure doesn’t seem like raising ticket prices would do much except make more season tickets available as people dropped their contributions and seats.

    • Puffdawg

      Also note the new Young Alum program they rolled out last year and the new programs this year (refer a friend, etc). None of those point to a super high demand.

  2. Rp

    I believe i posted a long time ago that the only reason our athletic department should have $67 million is to spend that money on UGA athletics. It sounds like they are using it to invest in emerging markets in Asia while making a nice return. Sorry, but that’s not the purpose of an athletic department. If that’s what they are all about, then move to NY and get a job on Wall Street. Their job is to improve the state of UGA athletics, and maximize the profits from UGA athletics. If they can’t figure out a way to do that, they are in the wrong place.

  3. bob

    So, when they took out the binds, what were the specified uses? Is taking a bond to create a slush fund a reasonable use of said bonds? That is like taking out a line of credit to create a savings account.

  4. 202dawg

    If they made the IPF truly multi-purpose (indoor track with space for field events) and included seating they could host meets during track season and maybe ever recoup some of the costs.

    • You could also spread that cost when accounting between multiple programs, including women’s track for Title IX accounting. Similar to how they did the practice facility behind Stegeman, combining with women’s hoops and gymnastics.

  5. Russ

    So the TV money isn’t revenue? The only way to increase revenue is raise ticket prices? Hmmmmm….

  6. The other Doug

    I wonder how long it will be until someone at the University sees the reserve fund as belonging to the entire University.

  7. Scorpio Jones, III

    “Think about it, we haven’t raised ticket prices since ’08.” If I was having a one-on-one with the AD and he said that, I would take it as a thinly veiled threat…and I would be very concerned about “road construction” blocking traffic on the west-bound sides of Broad St and Prince Ave immediately following a night game.

  8. OrlandoDawg

    Bottom line is they know they are right on the line on ticket prices. They are having the same discussions inside the room as those outside the room–improved viewing experience at home, cost of travel, diminished gameday experience, etc. If they thought they could substantially raise revenue by raising ticket prices, they would. Nothing they’ve done in the past suggests they’re holding the line out of the goodness of their hearts.

    Also, when the AD says the only way they can raise revenue is by raising ticket prices, then says the reserve has to take a $13 million hit for Foley–overstating the amount (it’s $12 mill), and ignoring the fact that several million dollars has been raised privately (was it $5 mill)–it’s an insult to the intelligence of fans. Does he think we can’t read and keep up?

  9. Bright Idea

    Here’s the thing they clearly can’t see about an indoor facility. If UGA makes it to Atlanta and it monsoons that entire week and the Falcons’ place is unavailable practice becomes difficult. A week of practicing in BM 20 yard field equals losing the SEC game and a playoff spot. That will cost a lot of money unless just being in the SEC brings it in anyway. That’s when that 2 or 3 days a year facility becomes quite a wise investment.

  10. I find it intellectually dishonest for McGarity to quote increasing ticket prices as the only way to substantially impact margins. I thought all that re-shuffling of two Big 12 teams and killing historic rivalries between Missouri/Kansas and Texas/A&M was about increasing revenues. Now you’re telling me they just did that for the hell of it?

  11. FisheriesDawg

    How much is the estimate for building the IPF? McGarity ought to do what he just did for baseball and challenge the fans to put up some of the money to build it. That gives him an excuse if they don’t raise much money but also saves a chunk of the reserve fund if they do. I’m sure there are a number of people out there who would be happy to have their name up on the wall at the new Donald Leeburn, Jr. Indoor Practice Facility. Win-win.

  12. DawginSG

    Dawson’s disgust, and his butchering of the English language, is hard to miss.

  13. 81Dog

    I hate it when people talk to me about issues as if they think I’m stupid. Only a moron with a room temperature IQ would believe the only way for the UGA athletic department to raise more revenue since 2008 would be to raise ticket prices. Either McGarity is really stupid, or he thinks we’re all really stupid. I dont think McGarity is stupid.

    • Happy happy happy Dawg

      He must know about your love of Duck Dynasty. You are right about how he ain’t stupid.

      • 81Dog

        Never watched a second of Duck Dynasty, so I’m not sure where you pulled that one from. Thanks for the deathless insight, though.

  14. Macallanlover

    McFrugal better raise ticket prices then because even Spurrier has figured this out. IPFs are a positive in recruiting, we look like Jack Benny on this issue. Get it done, you have the money. If you wait, you will not have the financing and UGA will be further behind the curve. Starting now would put us 2-3 more years behind our competitors. It doesn’t matter if the AD understands it or not, others do. Chintzy….and it is the Golden Goose that you are risking. No new revenue indeed!

    • FisheriesDawg

      Or, perhaps McGarity is of the opinion that there is a college football bubble and UGA is going to be in a golden position when the bubble pops and the rest of our conference brethren are sitting there house-poor with a $500,000 mortgage on a $200,000 house.

      I’m not sure that aiming for a time when college football becomes less profitable is a great financial strategy, but it could at least be a great strategy for putting trophies up in Butts-Mehre.

  15. macon dawg

    Why can’t they create an outdoor track out by the soccer/softball complex and then turn the current track into an IPF (and possibly combine it with an indoor track)? That seems to make more sense than creating an IPF out by the soccer/softball complex.

    The talk about not having the money to address the IPF and track is a bunch of nonsense. There is way more than enough available to do it and still be fiscally prudent.

  16. South FL Dawg

    That’s a pretty convincing write-up, Senator. I have never been in the pro-IPF camp, but it doesn’t sound like anyone at B-M has any clue what to do with positive cash flow. Maybe they should just retire the bonds. I’m sorry….I should say “allocate the funds to bond retirement.” Just get a line of credit for when the day comes you need it and it will be cheaper. Gee and here I thought Florida politics was awful :)

  17. cube

    I’ve said it before and I’ll say it again. Some powerful people are making a lot of money off that reserve fund.

  18. Noonan

    Dawson needs to put a sock in it and be thankful he has a full scholarship to a great University.

  19. Q

    Cube, or others, I need help here. What individuals profit from UGA football, other than the ones who are salaried employees? Is BM a bank for big donors? And how much are we talking about for how many people?